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Striking While the Iron Is Hot

Attempting to cement its foothold in the fast growing dually registered advisor market, Fidelity Institutional Wealth Services (IWS) and its correspondent broker/dealer business, National Financial, launched in early June HybridOne, a platform designed to offer hybrid advisors and broker/dealers a holistic array of servicing--including a wide swath of products, integrated technology, and streamlined client support. Ron Fiske was named executive VP of product development and management for IWS in early June, and is charged with overseeing HybridOne. Prior to joining Fidelity, Fiske spent eight years at Pershing, with the last four as managing director of the company's product management and development group. With HybridOne, Fidelity appears to be moving at an opportune time. A recent report by Boston-based Cerulli Associates found that between 2004 and 2007, dually registered advisors (which Cerulli defines as those who maintain a B/D affiliation, but also have their own RIA--separate from the B/D--for purposes of providing fee-based advice) grew at an annualized rate of 22%, a "stark contrast," Cerulli says, to other channels' growth. For instance, the bank and RIA channels had only a 2% growth rate over the same three-year period, Cerulli found. Also, 30% of assets managed by RIAs, Cerulli notes, are managed by dually registered advisors. Washington Bureau Chief Melanie Waddell spoke with Fiske in late July about HybridOne.

What's your goal in your new role?

To help maintain and enhance the overall value proposition of IWS's entire product and service offering, both technology and asset gathering products.

Have you been instrumental in developing HybridOne, since you were brought on so recently?

There were a lot of folks both at IWS and National Financial who participated in the start and launch of HybridOne. I was asked to take over the [HybridOne] initiative that was in flight due to the fact that I had a background in both the advisor and broker/dealer fields.

What does HybridOne offer advisors?

HybridOne offers an ability to have a consolidated face of the market that would offer advisors a whole range of choices of how they want to operate. I think for us, investment professionals who decide to leave any broker/dealer and start out on their own and become an advisor should be offered as many choices as possible in how they want to operate. There are a lot of good reasons why people might want to retain their brokerage licenses and operate within a broker/dealer; other advisors may want to become 100% fee-based. We want to be able to say that we offer as broad a capability as possible and go out to the market in a truly consultative way both with IWS and National Financial salespeople representing both organizations and offering advisors a choice.

We are also going to make enhancements to our infrastructure here, some of which will be delivered this year and some in 2009, which will help advisors inter-operate between a broker/dealer platform and a registered investment advisor platform. They will be able to work within both worlds as easily as possible.

Any other custodians offering a platform similar to HybridOne?

I think [other] organizations are capable of offering it. We're one of the first ones to try and stake that claim the way that we have.

It was developed because of advisor demand for these services?

Absolutely. Any good initiative like this goes where clients take us, and since customers are taking us in that direction, it is, by many metrics, the fastest growing segment of the advisor marketplace. We want to go where the marketplace is taking us, and certainly the marketplace is taking us in the direction of supporting hybrid advisors.

Can you detail how HybridOne provides tighter integration between National Financial's broker workstation and Fidelity's RIA workstation?

By the end of this year, we'll have single sign-on capability between what will become our legacy investment advisory platform, which is called Advisor Channel, to National Financial's technology platform, called StreetScape. We'll also be offering some service enhancements that will identify hybrid investors, and hybrid investor accounts to our service team so that they know that the individual they're dealing with has relationships with both an IWS advisor and a National Financial registered representative, who would in fact be the same person.

Next year our enhancements will be focused on three basic areas. One will be interoperability, both single sign-on and enhanced interoperability--meaning the ability to have an integrated experience between our new IWS workstation, which is called WealthCentral, and StreetScape. The second priority will be offering broker/dealers that are on the National Financial platform enhanced compliance and surveillance tools and reporting to allow them to fulfill in an easier way the regulatory requirements regarding supervision of registered investment advisor assets. The third priority is reporting; and making sure that we create better reporting to the end investor around assets that may be on a broker/dealer or registered investment advisor platform and creating consolidated reporting where possible.

Can you elaborate on the services that will be shared between your RIA business (IWS) and your institutional clearing arm (National Financial) through HybridOne?

I would say that there is largely platform parity between IWS and National Financial in terms of our overall offering. Trust services from IWS to National Financial is one example of an expansion of service to cater to the hybrid marketplace. On the National Financial to IWS side, there is the expansion of our lending platform to include non-purpose loans, which are currently offered on the National Financial platform but not on the IWS platform.

The consultative approach provided by HybridOne will help advisors decide which way they want to go?

Absolutely. We had an IWS sales and relationship management meeting last week and one of the highlights of the meeting were case studies where we went through several successful opportunities that we had and highlighted the approach that we take, which is bringing IWS and National Financial reps together and offering in one visit a total solution that bridges both the broker/dealer and RIA worlds. Many of our competitors don't approach the hybrid market this way--they don't come in and talk in a substantive way about "Would you want to set up a broker/dealer? Would you want to be a registered rep?" There are some larger organizations that might break away from the firm they are with that would consider starting up their own broker/dealer--being able to have a substantive discussion about all the details inherent in that is something that differentiates us.

One of the opportunities we did see was helping broker/dealers who are on National Financial's platform to fulfill their compliance obligations in a more straight-through, automated fashion. Consolidated and investor reporting will be coming up next year.

Is the goal to continue to enhance HybridOne? Will Fidelity be coming out with different types of products?

I'm a believer that we go where our customers in the marketplace take us. We have a development initiative for the remainder of this year and 2009, but we're in a dynamic marketplace and we want to be responsive to the marketplace and our competition. There are certain elements of the program--for instance, we talked about a service offering improvement for this year is identifying hybrid clients--I asked the team not to make the [enhancement] specifications for phase two until our customers had an experience with phase one and we got a sense from a significant sample of our customers what enhancements that they want to make. I didn't want to make any of these changes in a vacuum.